The Tanjong Pagar container terminal in Singapore.
Shock contraction in quarterly GDP raises risk of job losses
Officials already grappling with aging, productivity threats
Singapore’s economic data have gone from bad to worse this month.
Exports slumped to their second-worst rate since the global financial
crisis, the purchasing managers index slipped into contraction for the
first time since 2016, and the economy shrank the most in almost seven
years in the second quarter.
After spending much of early 2019 enjoying relative resilience, a recession
is now looming. That’s a warning shot for regional and global
economies, since Singapore’s heavy reliance on trade makes it somewhat
of a bellwether for the rest of Asia.
The severity of the slump may be down to trade tensions and a
global slowdown, but Singapore has been grappling with longstanding
economic threats that have been slowly eroding the city state’s growth
potential: rapid aging, labor market shrinkage, and sluggish productivity among them. Those risks will become more acute for policy makers now.
“Any
undue turbulence or prolonged stresses from the trade war are only
going to compound the challenges of all the other issues --
productivity, demographics, anything else,” said Vishnu Varathan, head
of economics & strategy at Mizuho Bank Ltd. in Singapore. “External
demand concerns will be at the top of the list for now, because if you
don’t get that one right it’s that much more difficult to solve
everything else.”
Singapore remains one of the most export-reliant
economies in the world, with trade equivalent to 326% of gross domestic
product, according to World Bank data. That puts the city state at the
center of the storm stirred up by its top two trading partners sparring
over tariffs.
The shock GDP figures earlier this month prompted some analysts to downgrade
their Singapore forecasts for the year to below 1%. The government is
set to revisit its own 1.5%-2.5% range next month, but for now, it’s remaining calm, seeing no recession for the full year.
What Bloomberg’s Economists Say...
“Barring
a swift rapprochement in U.S.-China trade relations, our forecast for a
0.2% year-on-year contraction in Singapore in 2019 remains on course.
The government has ample firepower to cushion the blow, but it may not be enough to avoid a recession.”
-Tamara Henderson, Asean economist
The slump is largely contained so far to manufacturing, which makes up about a fifth
of the economy, but could soon spread to other sectors such as retail
and financial services. That increases the risk of job losses at a time
when businesses like International Business Machines Corp. are already laying off workers and banks such as Nomura Holdings Inc. cut staff.
The number of retrenched
workers in Singapore rose to the highest in more than a year in the
first quarter, though the unemployment rate has remained fairly steady
at 2.2% amid a recovery in construction.
“The labor market looks
to be on two tracks at the moment -- there’s a weak market in the
manufacturing sector but a steady one in the services sector,” said
Shaun Roache, chief Asia-Pacific economist at S&P Global Ratings in
Singapore. “High-frequency indicators including industrial production
and trade suggest that the environment will remain challenging in
manufacturing for the year.”
While those cyclical headwinds buffer the outlook, policy makers are also grappling with structural impediments to growth.
An employee clears tables at a food center in Singapore.
Faced
with a rapidly aging population, the government has been on an
aggressive campaign to re-skill its labor force and prepare workers for a
postponed retirement.
The median age is set to rise to 46.8 years in 2030 from 39.7 in 2015,
faster than the other top economies in Southeast Asia as well as the
world as a whole, according to United Nations projections.
Tied to its rapid aging is Singapore’s productivity conundrum.
As
the labor pool shrinks and gets older, the city state’s answer to the
productivity challenge has been to automate and digitize. With an
ambition to become a “Smart Nation,”
the government has poured money and energy into digitization projects
of all kinds, from helping seniors fine-tune smartphone skills at
digital clinics to attracting financial technology giants to set up shop and test their ideas.
It’s
that technological advancement, along with its world-beating
infrastructure and efficiency, that continues to make Singapore attractive to
businesses like Dyson Ltd., the U.K. manufacturer that picked the city
state for its location to build its first electric cars. It’s also a
reason why officials are confident Singapore can meet its foreign investment targets for this year.
“They’re saying the right thing, doing the right thing,” said
Edward Lee, chief economist for South and Southeast Asia at Standard
Chartered Plc in Singapore, who has penciled in 1% growth for 2019.
“Retraining, ongoing structural reforms on the labor side -- those are
the right things.”
THE influential International Monetary Fund (IMF) has predicted slower global growth this year on the back of financial volatility and the trade war between the United States and China.
Turkey and Argentina are expected to experience deep recessions this year before recovering next year.
China, apart from fighting the trade war, is also experiencing its slowest quarterly growth since the 1990s, sending ripples across Asia. In the last quarter of 2018, China recorded an economic growth of 6.4%, which is the third consecutive quarter of slowing growth.
This has led to fears of China’s economy going into a hard landing and it possibly being the catalyst to spark global economic turmoil.
After all, it has been more than 10 years since the world witnessed the last recession in 2008 that was caused by a financial crisis in the US. If we are to believe the 10 to 12-year economic turmoil cycle, the next downturn is already due.
However, the economic data so far does not seem to suggest that the world will go into a recession or tailspin this year.
The bigger worry is what would happen next year.
The narrowing spread between the two-year and 10-year US Treasury papers would lead to banks being more selective in their lending. It is already happening in the US.
The impact is likely to be profound next year. When banks are more selective in lending, eventually the economy will grind to a halt.
But that is the likely scenario next year, assuming there is no fresh impetus to spur global growth.
At the moment, there is a significant amount of asset price depression due to slowing demand. The reason is generally because of the slower growth in China and the trade war.
China has fuelled demand for almost everything in the last few years. Companies and individuals from China drove up the prices of everything – from property and valuations of companies to commodities.
China itself is experiencing a slowing economy and the government has restricted the outflow of funds. Its overall debt is estimated at 300% of gross domestic product and banks are reluctant to lend to private companies for fear of defaults.
China’s manufacturing sector has slowed down because of the trade war. Companies are not prepared to expand because they fear the tariffs imposed by the US.
Nevertheless, the world’s second-largest economy is still growing, albeit at a slower pace. A growth rate of 6.4% per quarter is still commendable, although it is far from the 12% quarterly economic growth it recorded in 2011-2012.
The US, which is the world’s largest economy, is also facing slower growth this year. The Federal Reserve has predicted a slower economic growth of 2.3% in 2019 compared to the 3.1% the country recorded last year.
The ongoing US government shutdown is not going to make things easy.
As for Europe, the European Central Bank (ECB) has warned of a slowdown this year. The warning came just six weeks after the ECB eased off on its bond-buying programme that was designed to reflate the economy.
Business sentiments on Germany, which is a barometer of what happens to the rest of Europe, is at the lowest.
As for Malaysia, the country is going through an economic transition of sorts following the change in government. Government spending has traditionally been the driver of the domestic economy when global growth slows.
The new government has cut back on spending, which is a necessary evil, considering that many of the projects awarded previously were inflated. Generally, the cost of most projects is to be shaved by at least 10% – and some by up to 50%.
However, the projects with revised costs have not got off the ground yet and contractors have not been paid their dues. For instance, contractors in the LRT 3 project had complained of not getting payments for work done a year ago.
Fortunately, a new contract for the LRT 3 has been signed. Hopefully, the contractors will be paid their dues speedily and work recommences on the ground fast.
The volatile oil prices are not helping improve revenue for the government.
Domestic demand is still growing, although people complain of their income levels not growing. This is because companies as a whole are also not doing as well as in previous years.
Nevertheless, even the most pessimistic of economist is looking at Malaysia chalking up a growth rate of more than 4.5% this year, which is respectable. The official forecast is 4.9%.
One of the reasons for the optimism is that they feel government revenue is expected to be much higher than expected, giving it the flexibility to push spending if the global economic scenario takes a turn for the worse.
According to the Treasury report for 2019, federal government revenue is to come in at about RM261bil, which is 10.7% higher than in 2018.
The amount is likely to be much higher, allowing the government the option to put more money in the hands of the people. It also allows the government to reduce corporate taxes, a move that would draw in investments.
Malaysia has a new government in place. What investors are looking for are signs of where all the extra revenue earned will go. They are also looking for the next growth catalyst.
The trade war and financial volatility is causing structural shifts in the global economy. It is impacting China, the US and Europe.
Eventually, the global crunch will come, but it is not likely to happen this year.
New chip: A Kunpeng 920 chip is displayed
during an unveiling ceremony in Shenzhen. Huawei is seeking growth
avenues in cloud computing and enterprise services. — AP
https://youtu.be/IX5k_k4Q68c
HONG KONG: Huawei Technologies Co Ltd has launched a new chipset for use in servers, at a time when China is pushing to enhance its chip-making capabilities and reduce its heavy reliance on imports, especially from the United States.
Huawei, which gets the bulk of its revenue from the sale of telecommunications equipment and smartphones, is seeking growth avenues in cloud computing and enterprise services as its equipment business comes under increased scrutiny in the West amid worries about Chinese government influence over the firm.
Huawei has repeatedly denied any such influence.
Chinese firms are also seeking to minimise the impact of a trade dispute that has seen China and the United States slap tariffs on each other’s technology imports.
For Huawei, the launch of the chipset – called the Kunpeng 920 and designed by subsidiary HiSilicon – boosts its credentials as a semiconductor designer, although the company said it had no intention of becoming solely a chip firm.
“It is part of our system solution and cloud servicing for clients. We will never make our chipset business a standalone business,” said Ai Wei, who is in charge of strategic planning for Huawei’s chipsets and hardware technology.
The Shenzhen-based company already makes the Kirin series of smartphone chips used in its high-end phones, and the Ascend series of chipsets for artificial intelligence computing launched in October.
It said its latest seven nanometre, 64-core central processing unit (CPU) would provide much higher computing performance for data centres and slash power consumption.
It is based on the architecture of British chip design firm ARM – owned by Japan’s SoftBank Group Corp – which is seeking to challenge the dominance in server CPUs of US maker Intel Corp.
Huawei aims to drive the development of the ARM ecosystem, said chief marketing officer William Xu. He said the chip has “unique advantages in performance and power consumption”.
Xu also said Huawei would continue its “long-term strategic partnership” with Intel.
Huawei’s new ARM-based CPU is not a competitor to the US company’s x86 CPUs and servers, but complementary, Xu added.
Redfox Qiu, president of the intelligent computing business department at Huawei, said the company shipped 900,000 units of servers in 2018, versus 77,000 in 2012 when it started.
Huawei was seeing “good momentum for the server business in Europe and Asia Pacific” and expects the contribution from its international business to continue to rise, Qiu added.
Huawei also released its TaiShan series of servers powered by the new chipset, built for big data, distributed storage and ARM native applications.
The firm founded chip designer HiSilicon in 2004 to help reduce its reliance on imports.
In modem chips, Huawei internally sources 54% of those in its own devices, with 22% coming from Qualcomm Inc and the remainder from elsewhere, evidence presented at an antitrust trial for Qualcomm showed. — Reuters
Shrinking share: People walk outside an Apple
store in Beijing. Apple’s market share in China in the third quarter of
2018 was around 9, and has dipped from above 14 in 2015, overtaken by
local rivals like Huawei, Oppo and Vivo. — Reuters
https://youtu.be/iJfCBqPUKHQ
SHANGHAI: Apple Inc’s chief executive Tim Cook has his work cut out in China this year: the iPhone maker faces the looming threat of a court-ordered sales ban, the uncertain outcome of trade war talks and the roll-out of a new 5G network, where it finds itself behind rivals like Huawei and Samsung.
The complex outlook raises a challenge for Apple as it looks to revive its China fortunes after weakness there sparked a rare drop in its global sales forecast, knocked US$75bil from its market valuation and roiled global markets.
Cook told investors that the main drag on the firm’s performance in China had been a sharper-than-expected slowdown in the country’s economy, exacerbated by the impact of trade tensions between Washington and Beijing.
“We did not foresee the magnitude of the economic deceleration, particularly in Greater China,” he said.
Chinese shoppers told Reuters another element had been key: the high price-tag on Apple’s flagship phones.
Analysts said the firm faced a brewing storm of challenges: an economic slowdown, stronger rivals like Huawei Technologies Co Ltd bringing out comparable tech at lower prices and bubbling patriotic sentiment amid the trade war.
A Chinese court has also issued a preliminary injunction banning some Apple phones, part of a legal battle with chip maker Qualcomm Inc. This ban, potentially hitting iPhone models from the 6S through the X, has yet to be enforced.
Last Thursday a local industry body, the China Anti-Infringement and Anti-Counterfeit Innovation Strategic Alliance, called on Apple to heed the court order and not “trample the Chinese law by leveraging its super economic power and clout.” Apple declined to comment on the group’s statement but has previously said it believed its current phones complied with the Chinese court’s order.
“These are tough times for Apple in China,” said Neil Shah, research director at Counterpoint, adding the iPhone could see its market share slip to 7% this year in the face of stronger local rivals and worry about the sales ban.
Apple’s market share in the third-quarter of 2018 was around 9%, and has dipped from above 14% in 2015, overtaken by local rivals like Huawei, Oppo and Vivo.
Another question mark for Apple is its 5G strategy in China, where the US firm is not expected to have a 5G-enabled phone until 2020, behind rivals like Huawei, Xiaomi Corp and Samsung Electronics.
China is looking to push ahead with its rollout of a faster 5G network, with a pre-commercial phase this year and a commercial network in 2020.
Some are looking to make an early bet on the technology.
Huawei is planning a 5G phone mid-year, while Xiaomi is aiming for the third quarter. Samsung is expected to unveil a 5G phone in the first half of the year.
Industry insiders, however, said Apple would likely hold off until the fall of 2020 to have its own 5G-enabled phone, a strategy that would bypass the untested early period of the technology, but which could mean Chinese shoppers delay iPhone purchases or buy another brand that switched to 5G earlier.
“I’ll definitely be paying attention to 5G functionality when I buy my next phone,” said Wu Chengjun, a graduate student in Beijing who currently uses an iPhone X.
With the exception of Huawei, which makes it own 5G chips, Qualcomm is providing the technology to many of the major phone makers releasing 5G handsets this year.
“If you’re a (phone maker) looking for a ‘super cycle’ (of sales), if you don’t have 5G, your situation won’t get any better,” Cristiano Amon, Qualcomm’s president, told Reuters in an interview. ”
The carrier channel is going to be incentivised to start selling 5G phones in the second half of 2019, he said. — Reuters
Data points to slowing exports, companies warn of ongoing disruption
While 2018 was the year trade wars broke out, 2019 will be the year the global economy feels the pain.
Bloomberg’s Global Trade Tracker is softening amid a fading rush to front-load export orders ahead of threatened tariffs. And volumes are tipped to slow further even as the U.S. and China seek to resolve their trade spat, with companies warning of ongoing disruption.
Already there are casualties. GoPro Inc. will move most of its U.S.-bound camera production out of China by next summer, becoming one of the first brand-name electronics makers to take such action, while FedEx Corp. recently slashed its profit forecast and pared international air-freight capacity.
“Any kind of interference with commerce is going to be a tax on the economy,” said Hamid Moghadam, chief executive officer of San Francisco-based Prologis Inc., which owns almost 4,000 logistics facilities globally. “And the world economy is probably going to slow down as a result of it.”
Financial markets have already taken a hit. Bank of America Merrill Lynch estimates that the trade war news has accounted for a net drop of 6 percent in the S&P 500 this year. China’s stock market has lost $2 trillion in value in 2018 and is languishing in a bear market.
Recent data underscore concerns that trade will be a drag on American growth next year. U.S. consumers are feeling the least optimistic about the future economy in a year, while small business optimism about economic improvement fell to a two-year low and companies expect smaller profit gains in 2019.
Synchronized Slowdown
Global growth is set to decelerate in coming years
https://youtu.be/EaOmPx4sGOw
Source: Organization for Economic Cooperation and Development What Our Economists Say...
For the world economy, the threat of trade war has dissipated, not disappeared. Three risks stand out. First, 90 days of talks between China and the U.S. might end in failure, with higher tariffs following. Second, even without an increase in tariffs, front-loading of exports in 2018 will reduce shipments in 2019. Finally, looking beyond the trade war, early warning signs from PMI surveys to FedEx profit warnings flag a softening of demand.
--Tom Orlik, Bloomberg Economics
The International Monetary Fund forecasts trade volumes will slow to 4 percent in 2019 from 4.2 percent this year and 5.2 percent in 2017. They warn that trade barriers have become more pronounced.
Europe isn’t insulated either. While Germany’s key machinery sector will produce a record 228 billion euros ($260 billion) this year, the trade disputes are among reasons why growth will slow, according to the VDMA industry association. Output will increase about 5 percent in real terms in 2018, the most since 2011, before growth slows to 2 percent next year.
Then there’s the risk of the U.S. placing tariffs on auto imports from Europe and Japan, a move that would damage relations between some of the world’s biggest economies. The arrest of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou illustrates the risk of unexpected developments that can quickly inflame already tense relations.
"‘Trade divergence’ since 2018 and the ‘Tariffs-Limbo’ into 2019 are likely to keep a high degree of uncertainty and continue to have an impact on trade and investment plans," New York-based Citigroup global markets economist Cesar Rojas wrote in a recent note.
The critical question is whether Washington and Beijing can strike a deal by the March 1 deadline. If they succeed, a cloud will be lifted off the world economy. But for now, the threat that tensions will linger is a brake on business expansion plans, and thereby the global economy.
Dippin’ Dots LLC is among those caught in the crossfire. The U.S.-based maker of ice cream and other frozen products spent three years breaking into the Chinese market and opened its first stores in the country this year, only to pay double-digit tariffs on imported dairy products. CEO Scott Fischer said if the U.S.-China talks fail and additional tariffs are added, he’d be forced to rethink strategy, supply chains, and where in the world he expands.
“From an entrepreneur’s perspective, our question is how long will this continue?" Fischer said. “It’s hard to plan business in this environment."
— Bloomberg With assistance by Sveinung Sleire, and Christian Wienberg
China's breakthrough technologies 2018: Year in Review
From the world's longest sea bridge to the homegrown AG600 amphibious aircraft, from the world's fastest bullet train to the energy-saving "artificial sun"... China is emerging as a science and technology powerhouse. Click this video for some of China's breakthrough technologies in 2018.
American economist Jeffrey D. Sachs says Canada is doing the Trump
administration's bidding in its handling of the Huawei case. To read
more: https://www.cbc.ca/1.4947966
Nobody is supposed to win any war, and the US is anxiously proving that true in skirmishes with China over IT, trade and ‘national security’.
CHINA will not have Ivanka Trump arrested if she were to transit through Hong Kong airport, even now.
Beijing does not have the intent or capacity for that – nor the recklessness required for it, particularly in the throes of a trade war.
But US authorities had Sabrina Meng Wanzhou arrested while transiting through Vancouver airport. Ivanka and Sabrina are prominent businesswomen, but there are also differences between them. Ivanka is the daughter of President Donald Trump. In China and elsewhere, Sabrina is the daughter of modern China and its historic rise.
Critics of Sabrina’s arrest call it a kidnapping. The charges against her are unclear, the intent lacks transparency, and the action itself is unprecedented even for US double standards and a maverick president.
British politician George Galloway condemned Sabrina’s arrest as piracy, a death wish and an act of war. Prof Jeffrey Sachs calls it almost an act of war on China’s business world exposing Washington’s “supreme hypocrisy.” He finds the official pretext lacking credibility. Sachs says that in the past nine years alone, the US penalised 25 other companies from almost as many countries for violating unilateral US sanctions on doing business in third, fourth or fifth countries.
Yet in all these cases the US held the company responsible rather than an individual officer of the company. The case against Huawei had taken an unprecedented and disturbing character from the start.
Jack Ma says the trade war itself is only part of the complicated and now troubling relationship between the US and China. It is so messy that he sees any resolution only in another 20 years.
At one level, today’s US phobia about doing business with China relates to what Washington calls security concerns. Huawei founder and Sabrina’s father Ren Zhengfei was reportedly an elected official of the Communist Party of China (CPC) in 1982.
What would that mean for Ma of Alibaba, confirmed only two weeks ago as a current card-carrying member of the CPC? Nobody outside Washington seems too bothered.
Business, especially international trade, is supposed to be above petty political differences in a very diverse world. But apparently, pettiness matters in a trade war scenario veering towards a cold war. The trade war mindset and the persecution of Huawei are situated within global superpower and geopolitical rivalry between the world’s two biggest economies.
China is still a developing country despite its many achievements, and is determined to press ahead with more growth to develop its poorer regions. Huawei is in the forefront of this national resurgence.
The US remains the world’s technology leader and sole superpower – and intends to stay that way. Since a hyper-competitive international environment does not always favour it, it has resolved to block any challenge while complaining about trade with China.
Owing to China’s population size, significant GDP growth per capita would mean development on a massive scale. And because of reliance on international markets and global supply chains, connectivity makes infrastructure and IT vital.
The current US position on China consists of the phobias and manias of senior administration officials around Trump.
Among the most prominent is economics hawk Prof Peter Navarro, head of the White House National Trade Council. The author of Death By China was conspicuously left out of Trump’s cordial visit to China last year.
Since then, Navarro has moved closer to the Oval Office. So have other hawks circling China.
John Bolton is a Bush-era neo-conservative savouring entry into Trump’s inner circle. That did not happen in the first year, but now he is National Security Adviser. Bolton is notorious as instigator of the Iraq invasion. Now he has focused his foreign aggression on a trade war, indicating he had more to do with Sabrina’s arrest than Trump himself.
US Trade Representative Robert Lighthizer is another hawk eager to target Beijing. He regards China as a “trade threat” and has grown personally close to Trump.
The Economist called US Commerce Secretary Wilbur Ross a protectionist, and he has submitted to the hawkish trend against China. His shares in some China companies are no longer an issue, especially after he has turned his China experience to serve US nationalist interests.
Yet for all their devices, the attack on China by targeting Huawei will not dampen – much less stop – China’s rise. It will teach China to be more vigilant about trade partners, steel it for future pitfalls, and redouble its efforts to grow stronger.
Already there are signs of Sabrina’s arrest being counter-productive, with other forms of blowback against US interests virtually assured.
First, Beijing’s support for Chinese firms like Huawei operating internationally will grow. Even greater state-industry collaboration in China’s national interests, particularly when abroad, can be expected.
Second, China’s corporate sector will offer even greater support for the Government and the CPC in return. As this happens at multiple levels, China’s international competitiveness can only heighten.
Third, public support in China for Chinese companies has also grown, fuelling the rise of Chinese nationalism. Even before Sabrina’s arrest, a nationwide survey found majorities in 300 Chinese cities would boycott US companies.
Fourth, public support for the Chinese state and the CPC continues to accumulate. Whenever the national interest is threatened, all sectors close ranks against the common foe.
Fifth, the action against Huawei has provoked China and triggered its people’s national pride. The extent to which this will multiply is still uncertain, but a clear sense of it is evident in social media.
Sixth, international support for China and its campaign for free trade are set to grow. This involves more than just companies fearful of similar actions for violating US sanctions, since the US has alienated itself from even its allies.
Seventh, the Chinese diaspora in Canada has come out in support of Sabrina and other unfortunate Chinese nationals caught in such a situation. It has become more than just a national or criminal matter.
Eighth, Chinese Americans may also feel the racist pinch of US policy and act similarly. Will they then become suspects to their own Government?
Malaysian entrepreneur and Harvard MBA Tan Hock Eng’s Singapore-based Broadcom was supposed to take over California-based Quallcom in the biggest IT deal in the world. But in March this year the US scrapped the deal in the name of “national security interests.” To many ethnic Chinese that was a racist move.
Ninth, while some countries may sympathise with China over Huawei, others may just be put off by the US action and attitude. The result would be a net loss for US standing and prestige.
To provoke a rising China and get away with it requires consistently deft handling and masterful strategies. Both are lacking in Washington.
Trump has not been focused enough to even make senior administration appointments after two years. Melania Trump has also been pressuring her husband to dismiss the Deputy National Security Adviser.
The departure of senior staff has already been peaking on its own, many for personal reasons. Then Robert Mueller’s continuing investigations and indictments will add further to the dismissals.
All this is what comes of a “trade war” that is about more than just trade, involving more than any conventional notion of war.
US Secretary of State Mike Pompeo said two Canadian
citizens being kept in custody by China are unlawfully detained and they
should be returned. Pompeo made the accusation on Friday during a joint
press conference after the US-Canada 2+2 ministerial meeting
Mr
Ren Zhengfei survived Mao Zedong's great famine and went on to build a
telecom giant with US$92 billion in revenue that strikes fear among some
policymakers in the West.PHOTO: EPA-EFE
HONG KONG (BLOOMBERG) - At the sprawling Huawei Technologies campus in Shenzhen, the foodcourt's walls are emblazoned with quotes from the company's billionaire founder and chief executive Ren Zhengfei.
Then there's the research lab that resembles the White House in Washington. Perhaps the most curious thing, though, are three black swans paddling around a lake.
For Mr Ren, a former People's Liberation Army soldier turned telecom tycoon, the elegant birds are meant as a reminder to avoid complacency and prepare for unexpected crisis. That pretty much sums up the state of affairs at Huawei, whose chief financial officer, Ms Meng Wanzhou, who's also Mr Ren's daughter, is in custody in Canada and faces extradition to the United States on charges of conspiracy to defraud banks and violate sanctions on Iran.
The arrest places Huawei in the cross-hairs of an escalating technology rivalry between China and the US, which views the company, a critical global supplier of mobile network equipment, as a potential national security risk.
Hardliners in President Donald Trump's administration are especially keen to prevent Huawei from supplying wireless carriers as they upgrade to 5G, a next-generation technology expected to accelerate the shift to Internet-connected devices and self-driving cars.
Mr Ren is a legendary figure in the Chinese business world. He survived Mao Zedong's great famine and went on to build a telecom giant with US$92 billion (S$126 billion) in revenue that strikes fear among some policymakers in the West. Huawei is the No. 1 smartphone maker in China, and this year eclipsed Apple to become second maker globally, according to research firm IDC.
Though it has a low profile compared with China's Internet giants, Huawei's revenue last year was more than Alibaba Group Holding, Tencent Holdings and and Baidu Inc combined. About half of its revenue now comes from abroad, led by Europe, the Middle East and Africa.
The company's high-speed global expansion has come under fire for years, starting with the Committee on Foreign Investment in the US' derailing of an acquisition in 2008. More recently, Australia, New Zealand and the US have blocked or limited the use of Huawei gear.
The arrest and prosecution of Ms Meng in US courts comes amid a far bigger US-China struggle for technology dominance in the decades ahead - and could have huge, and potentially severe, consequences for Huawei. Mr Ren declined an interview request from Bloomberg News.
"It gives Trump a bargaining chip," said Mr George Magnus, an economist at Oxford University's China Centre. "She's the daughter of the CEO, Ren Zhengfei, himself a former PLA officer, and Huawei's alleged dealings with Iran are just the latest in a string of concerns."
An outright ban on buying American technology and components, should it come to that, would deal Huawei a crushing blow. Earlier this year, the Trump administration imposed just such a penalty on ZTE Corp, also a Chinese telecom, and threatened its very survival before backing down.
Both Huawei and ZTE are banned from most US government procurement work.
A full-blown, commercial ban in the US would not only apply to hardware components, but also cut off access to the software and patents of US companies, Mr Edison Lee and Mr Timothy Chau, analysts with Jefferies Securities, wrote in a report.
"If Huawei cannot license Android from Google, or Qualcomm's patents in 4G and 5G radio access technology, it will not be able to build smartphones or 4G/5G base stations," they note.
The company's legal troubles in the US may also spill into other markets.
"Government telecommunication infrastructure requirements are essentially locking out the Chinese supplier in critical growth markets," noted Morningstar Research equity analyst Mark Cash in an e-mail. "Additionally, telecom providers without government imposed restrictions may start limiting their usage of Huawei equipment for their 5G network build-outs."
If there's a Darth Vader in the minds of Chinese national security hawks in Washington worried about China's rising tech power, it's Mr Ren. In China, though, he's feted as a national hero, who rose from humble beginnings to the pinnacle of wealth and status in Chinese society.
His grandfather was a master of curing ham in his village in Zhejiang province, which afforded Mr Ren's father the chance to become the village's first university student, according to a 2001 essay by Mr Ren about his upbringing, which was published on a website linked to the Chinese Academy of Social Sciences.
His father, Mr Ren Moxun, was a Communist Youth League member, who later worked as a teacher and an accountant at a military factory, but who kept up his rebel fervour under the Kuomintang by selling revolutionary books.
After moving to rural Guizhou province, he met his wife Cheng Yuanzhao and gave birth to Mr Ren Zhengfei, the oldest of two sons and five daughters.
The family lived on modest teaching salaries. In one of Mr Ren's speeches, he remembered how his mother read him the story of Hercules, but withheld the ending until he came home with a good report card.
Famine Years
During the Great Leap Forward campaign that started in the late 1950s, a famine came to his home town after Communist Party industrialisation and collectivisation policies went off the rails. Mr Ren recalled in his essay how his mother stuffed into his hand each morning a piece of corn pancake while asking about his homework. His good grades gained him entry to the Chongqing Institute of Civil Engineering and Architecture.
After graduation, he worked in the civil engineering industry until 1974, when he joined the PLA's Engineering Corps as a soldier, and worked on a chemical fibre base in Liaoyang. Huawei says he rose to become deputy director, but did not hold military rank. He does, however, often pepper his speeches with military references.
"Our managers and experts need to act like generals, carefully examining maps and meticulously studying problems," Mr Ren said in a speech posted on a website for Huawei employees.
Mr Ren's Communist Party credentials aren't as deep as his father's. He attended the 12th National Congress of the Communist Party in 1982, and once cited the party's dogma of "a struggle that never ends" when defending the company's tough work hours.
But Mr Ren was a bookworm as a child and was denied acceptance into the Communist Youth League, according to the book Huawei: Leadership, Culture And Connectivity, a book co-authored by David De Cremer, Tian Tao and Wu Chunbo.
He didn't become a Communist Party member in the PLA until late in his military career. However, a 2012 House permanent Select Committee on Intelligence report on Huawei asked why a private company had a Communist Party Committee, which has become common among China's Internet giants.
Mr Ren retired from the army in 1983, and joined his first wife to work at a Shenzhen company involved in the city's special economic zone. It was around then that he had to sell off everything to pay a debt related to a business partner, and lost his job at Shenzhen Nanyou Group, as well as his first marriage, according to Ren Zhengfei And Huawei by author Li Hongwen.
Comeback Play
After a period of sleepless nights while living with family members, Mr Ren saw an opportunity. When China began its economic opening under Deng Xiaoping, the telephone penetration rate was lower than the average rate in Africa, or 120th in the world. He founded Huawei with four partners in 1987 with 21,000 yuan in initial working capital, just above the minimum threshold required under Shenzhen rules.
Huawei started out as a trader of telecom equipment, but the company's technicians studied up on switchboards and were soon making their own. Workers put in long hours in Shenzhen's swampy heat with only ceiling fans. Mr Ren kept up morale with subtle gestures, like offering pigtail soup to workers putting in overtime.
The company became known for its "mattress culture" in which workers would pass out on office mattresses from exhaustion. In 2006, a 25-year-old worker Hu Xinyu, who had made a habit of working into the wee hours and then sleeping at the office, died of viral encephalitis. Some Huawei employees subsequently committed suicide.
The deaths triggered a revision of the company policy on overtime, and the creation of a chief health and safety officer role.
It wasn't the only move Mr Ren made to stabilise morale. He used to pay his workers only half their salaries on payday, but eventually decided to convert the other half of employee salaries and bonuses into shares. The company's 2017 report shows that he has a 1.4 per cent stake, giving him a net worth of US$2 billion.
Wolf Culture
Huawei struggled for market share, with foreign companies using so-called "wolf culture" of aggressive salesmanship, which sometimes materialised in the form of Huawei employees flooding sales events with several times more salespeople than competitors.
The company ventured into international markets in the 2000s, with telecom equipment that was more affordable than products of competitors such as Cisco Systems. Huawei later admitted to copying a small portion of router code from Cisco and agreed to remove the tainted code in a settlement.
Mr Ren since stepped up the company's research and development. Of its 180,000 employees, about 80,000 are now involved in R&D, according to the company's 2017 report, and the company has been known to recruit some of China's top talent out of universities.
The company recently refocused on existing markets after the US government called Huawei a national security threat, and cited concerns over its possible control of 5G technologies. Mr Trump signed a Bill banning government use of Chinese tech including Huawei's, and has even contacted allies to get them to avoid using Huawei equipment.
Collectively owned by its employees, the company is known for a culture of discipline, in which no one, Mr Ren included, has their own driver or flies first class on the company dime. Lately, Mr Ren has been warning employees against using fake numbers or profit to enhance performance. The company set up a data verification team in 2014 within the finance department, which was overseen by Mr Ren's daughter.
In a recent speech posted on the Huawei employee network, however, he called for patience with critics, but rejected foreign intervention. "We will never give in or yield to pressure from outside," he said.
That maxim is going to be soon put to the test by the US Department of Justice.
Meng Wanzhou, the chief financial officer of Chinese tech
giant Huawei, who was granted a $7.5 million bail, is unlikely to be
extradited to the US because she is charged for political reasons,
analysts said.
